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Zinc falls, Copper May Advance in New York as Dollar Weakens Before Fed's Announcement
By Anna Stablum - Sep 21, 2010 5:58 AM PT

Copper may rise in New York and London as the dollar weakens before today’s conclusion of a meeting of Federal Reserve policy makers.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.5 percent, making dollar-priced metals cheaper in terms of other monies. The U.S. central bank probably will leave its target rate for overnight loans between banks at a record low, according to economists surveyed by Bloomberg.

“All is quiet ahead of the Fed meeting,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “A weaker dollar is supportive to most commodity prices, including base metals.”

Copper for delivery in December rose 0.7 cent, or 0.2 percent, to $3.5115 a pound at 8:48 a.m. on the Comex in New York after gaining as much as 0.7 percent. Copper for delivery in three months advanced 0.1 percent to $7,720 a metric ton on the London Metal Exchange.

The Fed is scheduled to announce its decision at about 2:15 p.m. in Washington. The benchmark interest rate has been in a range of zero to 0.25 percent since December 2008. Economists surveyed by Bloomberg earlier this month forecast the central bank will hold that rate until late 2011.

“The Fed statement will be closely watched as well for hints on quantitative easing,” Kryuchenkov said, referring to debt purchases by the central bank.

Housing Starts

Builders in the U.S. broke ground on more homes in July than estimated by economists, government figures showed, helping to support prices. Housing starts gained 10.5 percent to a 598,000 annual rate, the Commerce Department said, above the 550,000 estimated in a Bloomberg News survey. The country is the world’s second-largest copper consumer after China.

“The data suggest that the U.S. housing sector is slowly pulling itself off the canvas after a knockout punch,” said David Thurtell, a Citigroup Inc. analyst in London. Construction accounts for a quarter of copper demand, according to the Copper Development Association.

LME copper stockpiles fell for a fifth day to 380,025 tons, the lowest level since Nov. 5, daily exchange figures show. Orders to draw copper from inventories, or canceled warrants, rose 0.8 percent to 29,175 tons. One party held between 30 percent and 39 percent of the inventory and a second accounted for between 40 percent and 49 percent as of Sept. 17, according to exchange figures.

Inventories Contract

Copper stockpiles monitored by the Shanghai Futures Exchange declined to the lowest level in 11 months, according to data from the bourse. Inventories fell 3.9 percent to 94,365 tons, the exchange said today. That’s the lowest level since the week ended Oct. 9, 2009. Financial markets in China, the world’s largest metals user, are closed from Sept. 20 to Sept. 24 for the Mid-Autumn Festival holiday.

The copper market was in deficit by 281,000 tons in the year’s first half, more than double the year-earlier 125,000 tons, the International Copper Study Group said today.

Tin for three-month delivery on the LME fell 0.9 percent to $23,250 a ton. Prices last week reached $23,800, the highest intraday level since July 16, 2008. The metal is this year’s best LME performer, adding 37 percent, compared with the 24 percent advance by closest rival nickel.

Tin, which touched a record $25,500 a ton in May 2008, has been bolstered by disruptions to production in the Democratic Republic of Congo and Indonesia.

Too Much Aluminum

Aluminum advanced 0.5 percent to $2,205 a ton. A “clear oversupply” of the lightweight metal is the industry’s “main challenge,” Norsk Hydro ASA, the world’s fifth-largest producer, said today.

“We are still very worried about the U.S.,” Executive Vice President Arvid Moss said. “Demand driven by the infrastructure investments there will now gradually be less.”

Construction and transportation make up about 40 percent of global aluminum demand, according to researcher CRU.

A market surplus of the metal will shrink this year to 385,000 tons from 1.1 million tons in 2009, according to Barclays Capital. Next year the surplus will swell to 553,000 tons, the bank said in a report on Sept. 16. Aluminum usage will rise 8.4 percent this year in North America, Barclays Capital said, below its estimate for a 13 percent global gain.

Nickel slipped 0.5 percent to $22,950 a ton, lead declined 1.6 percent to $2,160 a ton and zinc fell 0.8 percent to $2,162 a ton.

http://www.bloomberg.com/news/2010-09-21/copper-may-advance-in-london-as-dollar-weakens-before-fed-s-announcement.htmlZin